Nick Train flags ‘shift in investor preference’

As Finsbury Growth and Income Trust celebrates ‘quarter of improved relative performance’

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Finsbury Growth & Income reported a “better” relative performance in September in the face of tough market conditions.

The £1.8bn trust’s net asset value dropped 2.7%, while its share price declined 3% against the FTSE index’s decline of 5.9%. This marked a better relative performance for the portfolio, as it had trailed the FTSE All-Share in August.

There is still some ground to make up, however, after the sharp rotation away from growth at the start of the year. In the nine months to the end of September, FGT’s share price has returned -10.8% compared to its benchmark’s -7.9%. The trust’s NAV is down -11% over that time frame.

Fund manager Nick Train (pictured) attributed the improved monthly performance to a “shift in investor preference” towards companies that were likely to be less adversely impacted by current market conditions.

Train said: “The growing macro-economic disturbance afflicting many nations has also weakened investors’ confidence in the earnings power of cyclical businesses.

“As a result, we note, investors have turned for their equity exposure to the shares of durable, conservatively-financed and steadily compounding companies – on the expectation their business operations are likely to be less adversely affected than the average. We own a lot of this type of company […], deliberately so.”

The best performing holdings across the month were Diageo, which makes up 12.4% of the portfolio, as well as Hargreaves Lansdown, Experian and Sage. Train said: “All of these are companies with well-merited reputations for predictable cash flows generated from brands or business franchises that their customers are likely to continue patronising in all but the most adverse economic circumstances.”

He added: “While it is easy to categorise our investment approach as purely ‘defensive’, we do not see it as such. Instead, it is our hope that by holding concentrated positions in such exceptional and predictable companies as those mentioned above and others – AG Barr, Fevertree, Heineken, Mondelez, Rathbones, Remy Cointreau and Schroders – we can not only protect our clients’ capital in difficult times, but also generate competitive absolute returns over all longer time periods.”

Diageo 12.4%
Relx 12.0%
London Stock Exchange 10.7%
Unilever 9.3%
Mondelez International 8.2%
Burberry Group 7.9%
Sage Group 6.2%
Experian 6.1%
Schroders 5.9%
Remy Cointreau 5.8%

Source: Top 10 FGT holdings, September 2022 factsheet

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